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August 1, 2012 "Corporate Counsel" Magazine

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"GETTING THE MAXIMUM LITIGATION BANG FOR YOUR BUCK"

"Litigation efficiency adviser" (LEA) consulting is a new development on the legal landscape in the current recession. In today's tough economic climate, small and midsize companies in particular cannot afford to overpay on their outside legal fees. Corporate operating budgets are already stretched too thin.

However, while Fortune 1000 corporations have their own large, full-service in-house legal departments to ensure that they receive efficient value for their "litigation dollar" from outside law firms, small and midsize companies generally do not possess the same internal know-how and capability. They either lack their own in-house legal department altogether, or if they do have one, it is generally a very small law department more often staffed by a solo non-litigator general counsel or a handful of non-litigator business attorneys.

Small and midsize company non-litigator CLOs, whether solo or in very small departments, will still end up being responsible for outside legal fee oversight, litigation management, and case budgeting in any expensive lawsuit where there is no insurance coverage to pay the company's legal fees. The non-litigator CLO will naturally hope that their outside law firm will end up being reasonable and efficient about billing and budgeting in the company's lawsuit. Unfortunately, that does not always happen. For that reason, LEA consultants work closely with CLOs.

An LEA consultant is a very experienced, seasoned business litigator (usually with 20 or more years of complex litigation experience on their resume) who wears a different kind of hat. They do not practice law, give legal advice, interpret the law, or make legal strategy decisions in the company's lawsuit.

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LEA consultants advise CLOs on "dollars-and-cents" litigation cost issues. They educate the CLO about legal fees, efficient litigation management practices, case budgeting, and appropriate law firm case staffing. For example, an LEA consultant may advise the CLO that there are too many law firm attorneys staffing the company's lawsuit (which is a major driver of litigation inefficiency and overbilling), and what staffing levels are more customary in the legal marketplace for that type of lawsuit. An LEA consultant may also tell a CLO whether the case staffing is concentrated tightly enough in the hands of a small core team of attorneys at the law firm (which is the desired objective), rather than being too fragmented and inefficient.

In a May 22, 2012 article on CorpCounsel.com, Connextion general counsel Stephen Kaufman predicted that "as the next generation of general counsel takes charge, evaluations of outside counsel will rely more and more on metrics assessing efficiency and productivity."

Non-litigator CLOs at small and midsize companies may not have enough experience to be able to evaluate efficiency levels by their outside law firm in an expensive, uninsured lawsuit, which can last two to five years through trial and possible appeals. Although they are the client, the non-litigator CLO may feel they are not on a level playing field with their outside law firm. They may feel that the legal fees in the company's lawsuit are too unpredictable or inexplicable. When the CEO, CFO, or board inquire about why the company's legal fees on the lawsuit are so high, the CLO may not feel they have enough answers at their fingertips to satisfy the higher-ups. Talking to their outside law firm may not give them all the answers they need, either.

The LEA consultant's role is to help alleviate those CLO concerns. The LEA consultant aims to make the CLO's life easier by making the CLO a smarter, more knowledgeable, more informed client about the company's lawsuit, and by continually suggesting to the CLO ways to reduce the outside legal fees over the course of the lawsuit. Figuratively speaking, the LEA consultant is like a "guardian angel" sitting on the CLO's shoulder as an independent voice in their ear throughout the lawsuit.

Following is a sampling of problems that a CLO may encounter in their company's lawsuit that an LEA consultant can help them troubleshoot. Left unattended, all of these problems will drive up the company's outside legal fees:

  • Hiring inefficient outside counsel
  • Not clearly understanding the law firm's retainer agreement
  • Litigating the lawsuit without having a strategic litigation plan
  • Litigating the lawsuit without having understandable case budgets from the law firm
  • Not recognizing inefficient law firm case staffing in the lawsuit
  • Continuing to litigate without understanding the provable damages in the lawsuit
  • Filing expensive court motions that have questionable chances of success
  • Spending tens of thousands of dollars on marginal depositions and discovery

An LEA consultant is not to be confused with a "legal bill auditor." Legal bill auditors are sometimes hired by companies to review the legal work already performed and billed by their outside law firm and to find ways to cut the legal bills after the fact. Needless to say, law firms do not like legal bill auditors. An LEA consultant, on the other hand, relies on up-front, proactive (not reactive), preventive methods and techniques to promote greater legal fee control, litigation management efficiency, and case budgeting predictability before the legal work is performed by the law firm. The LEA consultant can be engaged by the CLO at the start of a company's lawsuit (even at the outside counsel selection stage) or midway through the case as it churns toward trial.

By playing this more up-front, proactive role, the LEA consultant also works to ensure that the CLO does not end up in a nasty, expensive fee dispute with their outside law firm after the company's lawsuit is over, as is happening more frequently to small and midsize companies. LEA consulting helps take the unpleasant surprises out of the legal bills for the CLO. It is essentially a form of risk management for uninsured litigation expenses.

The following criteria provide a general rule-of-thumb for when a non-litigator CLO at a small or midsize company may want to consider hiring an LEA consultant:

  • Company has $20 million-$500 million in annual revenues
  • Company is litigating in U.S. federal or state court in any of the 50 states, or before a regulatory/administrative agency
  • Company is continually paying at least $15,000 each month in legal fees out of its own pocket on a single lawsuit
  • No insurance coverage is available to pay those legal fees
  • Total legal fees on that single lawsuit are expected to reach mid-six-figures, and may approach or exceed $1 million over the lifespan of the lawsuit

Obviously, a company that has insurance coverage to pay its legal fees as a defendant in a lawsuit may not need an LEA consultant. An insurance carrier is paying those legal bills, although there is never any insurance coverage available when a company is prosecuting its own lawsuit as a plaintiff. However, many common, expensive types of business lawsuits filed against small and midsize companies today may not be insured under business liability insurance policies, so a company may have to pay those legal defense fees itself. Examples include:

  • Breach of contract (e.g., involving customers, suppliers, vendors, contractors, subcontractors, partners, lenders, investors, etc.)
  • Commercial fraud
  • Intellectual property (e.g., patent, trademark, trade dress, copyright infringement)
  • Competitor disputes (e.g., trade secrets, unfair competition, certain business torts)

LEA consulting engagements should be structured very differently from typical law firm fee arrangements in order to give maximum value to a CLO. First, the LEA consultant should always work on a month-to-month basis, cancellable by the CLO at any time for any reason, with no price increases in the consulting rate throughout the engagement. That gives certainty and predictability to the LEA engagement for the CLO, and avoids the perceived risk to the CLO of being automatically locked into a longer-term engagement it might not want. It also keeps the LEA consultant properly motivated. They have to keep proving their value to the CLO month after month if they want to stay engaged. The risk is borne by the LEA consultant this way, not the CLO.

Second, unlike what most law firms do, LEA consultants should always charge a monthly flat fee for their services. It should be reasonable in relation to the outside legal fees that the CLO is continually paying on the company's lawsuit each month. The CLO may build the monthly consulting fees into the overall case budget for the lawsuit. LEA consultants work on a per-lawsuit basis, meaning they consult on only one lawsuit in each engagement. For that reason, CLOs may want to save them for more difficult, expensive lawsuits, instead of everyday routine litigation.

The U.S. legal profession is in the midst of possibly its worst recession ever. As a result, change is starting to come to the traditionally change-resistant but now highly competitive legal field. LEA consulting is another sign that CLOs want more transparency and accountability—along with far fewer unpleasant surprises—from their outside law firms. Otherwise, they can always simply take their litigation business elsewhere.

Ken Moscaret is a California attorney who testifies nationally as an expert witness on legal fee reasonableness and litigation management in large, complex lawsuits. He also consults to CLOs and CFOs of small and midsize companies, both domestic and overseas, on outside legal fees, litigation management efficiency, case budgeting, law firm case staffing levels, and outside counsel selection in expensive lawsuits in the U.S.

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February 7, 2012 - Press Release

"CONSULTING FIRM CHANGING THE WAY MID-MARKET COMPANIES WORK WITH THEIR OUTSIDE ATTORNEYS"
In these difficult, cost-conscious economic times, change is finally coming to the traditionally change-resistant U.S. legal profession. Corporate clients are now taking more affirmative, aggressive steps to protect themselves against runaway legal bills and litigation budget overruns. Attorneys have no choice but to cooperate or see their business dry up.

One sign of that change is Moscaret Consulting Group (MCG), which offers the only global litigation management consulting program for midsize, middle market companies located in the U.S., Canada, Europe, and soon Asia who have to litigate expensive lawsuits as both plaintiffs and defendants in U.S. federal and state courts in all 50 states.

This innovative first-of-its-kind program is tailored for midsize companies who have to pay six-figure and seven-figure legal fees out of their own pockets to U.S. law firms who represent those companies in lawsuits that include patent and trademark infringement, trade secrets, unfair competition, breach of contract, and business fraud, among others. The legal fees in such lawsuits may not be covered by today's business insurance policies.

MCG consultants are themselves highly-experienced former complex litigators with 15 - 35 years of law practice experience each who have left the practice of law behind, but still draw upon their extensive litigation backgrounds in their consulting roles for midsize companies. They have worked at major law firms in the past, and some also have in-house counsel experience.

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The CEO and founder of MCG, Ken Moscaret, is a licensed California attorney since 1980 who, after 10 years of business litigation and trial practice in California, went on to became one of the leading courtroom expert witnesses in the U.S. on legal fee reasonableness and litigation management efficiency, often for big corporations. Explains Mr. Moscaret:
"Our firm wanted to move one step down the corporate food chain to help midsize, middle market companies. Midsize companies may not have an in-house legal department like large corporations do, and even if they do, their in-house counsel usually do not have experience in managing complex litigation. Too often in midsize companies, it is left up to the CEO, COO, CFO, or risk manager to try to control the outside legal fees and litigation budgets without having the know-how or even time to do that effectively. That's where we come in. We act like a 'guardian angel' for the company as they try to deal with their expensive lawsuit and the mounting legal fees month in and month out."
MCG doesn't act as a midsize company's legal department, or give legal advice to the company, or make litigation strategy decisions for the company. MCG works as an intermediary "teammate" with midsize company management and its outside law firm to make sure both sides stay on the same page and are working efficiently and cost-effectively with one another month after month for the duration of the lawsuit, which can take up to 5 years to resolve. MCG consultants constantly educate company management about the legal fees, litigation management cost-efficiencies, and case budgeting to turn midsize company management into smarter, more informed clients.

Meanwhile, MCG consultants also work collegially and constructively with a company's outside law firm. Being former complex litigators themselves, MCG consultants understand exactly what the law firm is doing and all the key phases and aspects of a lawsuit that can impact the legal fees and litigation case budget along the way. Company management may not have in-depth experience with the twists and turns of litigation. MCG consultants are well-positioned to educate company management about the specific pros and cons of a proposed course of action in the company's lawsuit from a litigation cost perspective.

MCG consultants deliver the program's services without infringing on the attorney-client privilege. No confidential, privileged information needs to be divulged for a midsize company to receive the benefits of MCG's program.

According to Mr. Moscaret:
"Our program is trying to strength the attorney-client relationship in the long run, not supplant it. We're not acting as a midsize company's legal department. We don't make the litigation strategy decisions. The company and their law firm do that. We are consultants trying to facilitate better two-way communication between attorney and client about important dollars-and-cents litigation cost issues. While we are respectful of the law firm's role, we're always asking law firms to work with us to find ways to deliver successful litigation results for their corporate clients in the most efficient, cost-effective manner possible."
Furthermore, on those occasions when company management may, for whatever reason, prefer not to initiate a potentially awkward, difficult conversation with their law firm about any non-privileged subject, MCG consultants are ready and available in their intermediary role to speak to the law firm in advance to help maintain a smoother attorney-client relationship.

This go-between consulting model has had success in the past. The former General Counsel of the huge Los Angeles Unified School District, Richard K. Mason, retained Mr. Moscaret's services for L.A. Unified starting in the mid-1990's to help L.A. Unified deal with its tens of millions of dollars in annual outside legal fees at the time.

Mr. Mason says in a testimonial on the MCG website that he "found this service to be extremely valuable in helping manage my outside counsel relationships and litigation budget, and in gaining a better understanding of how legal fees were being incurred by my outside counsel in complex litigation. Moscaret Consulting acted as a trusted go-between for me and my outside law firms."

Mr. Moscaret says that there are benefits from his firm's program for the law firms, too. First, with MCG consultants working to troubleshoot any litigation efficiency and case budgeting problems in a lawsuit before they blow up, law firms will be less likely to find themselves in a costly, nasty attorney fee dispute with their corporate clients after the lawsuit has ended. The media is full of articles in these difficult economic times about business clients and their law firms suing each other over legal fees.

Second, when a fee dispute arises, clients often hire legal bill auditors to scrutinize and fly-speck a law firm's billing invoices, looking for reductions after the fact. According to Mr. Moscaret,
"Legal bill auditing is a purely reactive process which can undermine the attorney-client relationship. By contrast, our program is an up-front, proactive, more collegial approach to managing legal fees and controlling litigation budgets. Every corporate client wants more predictable legal budgets these days."
MCG offers its program to midsize companies in the U.S. and abroad for a very affordable fixed price each month, on a month-to-month "subscription" basis, which companies can cancel at any time without any long-term commitments. Companies can begin subscribing to MCG's program at the start of a lawsuit or even midway through the case if company management has become frustrated or concerned about spiraling legal fees.

Mr. Moscaret describes MCG's basic value proposition to midsize companies this way:
"If a midsize company is paying large legal fees out of its own pocket each month for an expensive lawsuit, then for a fairly small amount of money each month, that company can obtain ongoing monthly access to the expertise and assistance of one of the leading legal fee and litigation management expert firms in the U.S. Who does the company have internally who can help them oversee the legal fees and litigation budget on their lawsuit for such an affordable monthly price?"
Besides helping midsize companies deal with the legal fees, litigation management efficiencies, and case budgets on their lawsuit, MCG consultants also help company management find and interview suitable outside counsel if litigation is anticipated by a company but has not yet started. They can also recommend more creative "alternative" legal fee arrangements for a midsize company to propose with its chosen law firm.

MCG is working with "trusted" outside advisors to midsize companies, such as CPA's, investment bankers, management consultants, and other professionals to help distribute its program to the midsize corporate community across the U.S. and abroad.

MCG's program can also help public entities who have to pay large litigation fees to outside counsel, but who similarly lack the internal know-how and capability to cost-effectively manage their complex litigation matters.

MCG currently has offices in the Seattle, Los Angeles, and Miami areas, and also in London.

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Download the full press release in PDF or Word format


July 26, 2011


CEO KEN MOSCARET EXPLAINS THE PROGRAM'S BENEFITS

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